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interest at 10 percent on the unpaid balance of grape purchases
by Winery, no interest was accrued for 1987 by Winery with
respect to the amounts due Vineyards. Winery's rent payments to
Vineyards also ceased during 1986. This was done at the instance
of Bank of America. Once Winery obtained a line of credit from
Napa National Bank, however, interest and rent payments resumed.
The foregoing facts demonstrate that Vineyards and Winery
dealt with each other on terms that were significantly different
from those on which they dealt with unrelated parties. Moreover,
the record indicates to us that the terms on which they dealt
were intended to benefit Winery and imposed burdens on Vineyards.
Vineyards executed agreements subordinating its claims against
Winery to those of Winery's lenders to induce those lenders to
grant credit to Winery. The terms on which Winery purchased
grapes from Vineyards were also intended to favor Winery. For
instance, in a November 24, 1986, letter to Bank of America, Mr.
Groth wrote that "Judy and I have provided generous delayed
payment terms to the Winery that are still adequate." Without
the generous payment terms granted by Vineyards, Winery could not
have purchased the grapes it required without the infusion of
additional capital.
Winery did not make payments to Vineyards for grape
purchases during 1982 and 1983 because funds were not available.
Winery began to pay Vineyards after Winery obtained a line of
credit during 1984, but payments were subject to the control of
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